The Rockledge balance sheet lists current assets of $714,000 and current liabilities of $510,000. What current ratio should be reported?
Correct Answer
C) 1.40 to 1
Current ratio is current assets divided by current liabilities.
Why This Is the Correct Answer
Current ratio is current assets divided by current liabilities.
Why the Other Options Are Wrong
Option A: 0.71 to 1
0.71 to 1 is below the supported result for current ratio; it likely uses the wrong base, period, or account bucket.
Option B: 1.30 to 1
1.30 to 1 is below the supported result for current ratio; it likely uses the wrong base, period, or account bucket.
Option D: 1.56 to 1
1.56 to 1 is above the supported result for current ratio; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Current Ratio drawer for Surety Analyst: label assets before counting dollars.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Financial Ratios, Balance Sheet Ratios; use the job ledger figures in the stem and recompute the same accounting measure.
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